This time of year the abundant ads for junk removal and cheap storage units remind us that it’s time for Spring cleaning, an annual pastime that has perhaps been bolstered by the need to unlock extra space in the home during the pandemic. Businesses too have managed to find space to accommodate safe distancing, either by pushing unneeded items to dark corners or back-lot containers or occasionally by chucking them. It’s the typical 5S lament: Sorting and setting in order, but not sustaining the improvement. Which, of course, is why Spring cleaning is an annual thing.
Removing clutter from our lives is a good thing, be it personal or professional. But there’s a huge, often missed opportunity that is unique to business: inventory. We buy it, machine it, fabricate it, assemble it, paint it or process it in some other way and then we store it for eventual use (or obsoletion.) According to Zipinventory.com, the ideal inventory turnover for a company is 3 -6 times per year. Wow! The things we can learn from the Internet. Seriously, in our personal lives we would never consider maintaining those levels of household inventory – not even in a pandemic. But it’s normal in business. After 50 years in manufacturing, my unscientific estimate for ratio of inventory storage space to production floor space is 1:1, maybe worse. Businesses mask this ratio with high-bay, high-density storage; perhaps a fairer ratio would be cubic feet of storage. I suppose the ratio for that would be worse. And these storage optimization solutions come with their own set of problems.
In one of my last factory visits of 2020 just before Covid, I asked to see the stockroom, as I always do. It’s like the heart of the business, with inventory flow analogous to blood flow. So, the health of the stockroom says a lot about the overall flow of value to the customer. The factory manager who was hosting my visit pointed to a 5S evaluation posted in the area and apologized: “This is a 5S mess. The aisles are cluttered and it’s impossible to find anything. We can’t get these guys on board.”
I chose my response carefully: “Perhaps the stockroom cannot organize because they cannot count on stability of material flow.”
The factory manager answered defensively, “We’ve already doubled the size our stockroom to account for variability. We gave them extra space and it’s still a mess.”
“Why do you suppose?” I asked him.
Fact is, it’s tough – impossible — to organize inventory when you have no idea of what’s coming and going. In this sense, the stockroom is a reservoir reflecting every policy and habit that authorizes inventory. Increasing the reservoir’s size only enables that. I’ve lost track of the number of posts I’ve written about the punishment inflicted by outmoded policies and bad habits which may, in fact, achieve the dismal goal of 3-6 turns per year but at the expense of profits, cash flow, and customer service. Here are a few 3-minute reads from past years about inventory-related policy snafus that may help you to regain some extra space for production in 2021:
- Optimize This — Who determines what is optimal? (2011)
- Standard Units – The relationship between time and quantity. (2020)
- Insignificant Digits – Sometimes measures from the past should stay in the past. (2011)
- Nice Round Numbers – Want to pyramid your inventory? Just keep rounding up.(2014)
- Profitless Part Proliferation – How much of your inventory is redundant? (2016)
One to read per day for next week.
Happy Spring. Stay safe and protect those around you – get your shots.
PS Like this post? Did you know you can actually hear from Bruce live during his free webinars presented on the second Tuesday of every month? On May 11, he’ll discuss “Bad Handoffs“. Save your seat today! And on top of that, did you know you can see recordings of all the webinars he’s ever given on Leanflix, GBMP’s streaming Lean Training Video platform? (THERE ARE MORE THAN 60 OF THEM!) With topics ranging from “The New Gemba” to “Lean Self Assessments”, “Responding to Managerial Objections to Lean” and “Making Huddle Boards Work”, there are at least a few that will “speak” to you and your Continuous Improvement challenges. Check ’em out today!